This paper presents the main research findings of a study conducted in two industrial districts and what I refer to here as Local Industrial Arrangements - LIAs. The research focuses on the transition from a situation characterized by informal or illegal production, low wages and precarious work conditions, to one characterized by high levels of productivity/quality/fair labour conditions. The findings of the empirical study reveal the importance of specific institutions in the transition from a widespread informality to the more stable and sustainable situation of the LIAs. In the case of Jaraguá (GO), it was the legal framework that enabled this change and the subsequent impact on local development, while in the case of Toritama (PE), transition was stimulated by the cooperation between legal and environmental institutions.